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Earnings Update: Here's Why Analysts Just Lifted Their MyState Limited Price Target To AU$5.80

Simply Wall St

It's been a good week for MyState Limited (ASX:MYS) shareholders, because the company has just released its latest half-year results, and the shares gained 2.6% to AU$5.84. Results look mixed - while revenue fell marginally short of analyst estimates at AU$63m, statutory earnings beat expectations 3.9%, with MyState reporting profits of AU$0.34 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

View our latest analysis for MyState

ASX:MYS Past and Future Earnings, February 22nd 2020

Taking into account the latest results, the most recent consensus for MyState from three analysts is for revenues of AU$131.0m in 2020, which is a satisfactory 6.0% increase on its sales over the past 12 months. Statutory earnings per share are expected to increase 7.1% to AU$0.36. Yet prior to the latest earnings, analysts had been forecasting revenues of AU$127.5m and earnings per share (EPS) of AU$0.35 in 2020. So there seems to have been a moderate uplift in analyst sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

With these upgrades, we're not surprised to see that analysts have lifted their price target 10% to AU$5.80 per share. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values MyState at AU$6.10 per share, while the most bearish prices it at AU$5.20. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.

It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the MyState's past performance and to peers in the same market. It's clear from the latest estimates that MyState's rate of growth is expected to accelerate meaningfully, with forecast 6.0% revenue growth noticeably faster than its historical growth of 0.08%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 19% next year. It seems obvious that as part of the brighter growth outlook, analysts expect MyState to grow faster than the wider market.

The Bottom Line

The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around MyState's earnings potential next year. Fortunately analysts also upgraded their revenue estimates, with sales performing well and MyState's revenue growth expected to exceed the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for MyState going out to 2023, and you can see them free on our platform here..

You can also see our analysis of MyState's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.